Federal Special Ed Funding Formula Needs Repair

Last month, the Obama administration announced a new plan to hold states accountable for the successes and failures of students with disabilities in the K-12 educational system. Students with disabilities graduate from high school at a rate 20 percentage points lower than the overall student population, and struggle to achieve proficiency in math and reading. States should have high expectations for those students, said Secretary of EducationArne Duncan, or risk those students dropping off the map without the educational background they need.

What Duncan didn’t mention in the announcement, though, is that states are being asked to layer the new accountability requirements on top of an outdated federal funding structure. The Individuals with Disabilities Education Act (IDEA), which governs federal special education law, was last reauthorized in 2004, and its now-$11.5 billion financing mechanism hasn’t changed since 2000. While Congress has spent months drafting the recently released Higher Education Act reauthorization bills (last reauthorized in 2008), IDEA has been pushed to the back burner.

That could be a big problem–if you live in the wrong state, at least.

See, Congress awards IDEA funds to states based on a formula. First, states get a base dollar amount that totals the 1999 award size. Back then, the formula was derived from the number of children with disabilities identified within the state, so it was effectively a function of the state’s size. Those base awards total about 37 percent of all federal IDEA funding. Then, with any remaining dollars, funds are divided across states based on their share of the population ages 3 to 21 (85 percent of the dollars) and their share of those children living in poverty (15 percent). States award dollars to school districts on the same basis–a base award plus 85 percent based on the district’s share of population within the state and 15 percent based on the district’s share of children living in poverty–albeit with their own data sources for calculating a district’s poverty rate.

But the formula is even less straightforward than it sounds. Some states are granted a bonus in the form of a minimum award size — so many small states and small districts receive more than the formula would otherwise dictate. Wyoming and New Mexico, for instance, receive $275 and $291 per child in the state, respectively, while Texas is awarded only about $177 per child.

Those disparities carry over to the next level, too. In fact, an analysis of districts across 38 states found that the smallest districts–those with fewer than about 300 students–received $35 more per child enrolled in the district than did their larger counterparts. Meanwhile, the largest districts–those with more than about 3,700 children–were awarded $23 less per child compared with other school districts. All that means that the nearly 26 million kids across the 1,900 districts in the largest population category have access to fewer resources than their counterparts lucky enough to live in a small state.

And because the formula hasn’t been updated in so many years, it hardly reflects reality anymore. States that have seen population increases since the 1999 base year–which isn’t recalibrated each year like the rest of the funds–have lower per-child funding, on average, because they’re splitting that funding across more kids. Within states, districts with higher enrollment compared to the 1999 base year receive as little as half the per-child funding as districts with lower enrollment do. In Nevada, districts that have grown receive $170 per child, on average, while districts that have shrunk since 1999 receive $270 per child — a nearly 59 percent difference. In Ohio, the difference is 25 percent; in Arizona, it’s almost 36 percent.

The federal IDEA funding formula needs more than a facelift; it’s in need of some serious repair. States and school districts are asked to cover the bulk of U.S. spending on special education students, and our newly published data analysis suggests the federal government isn’t doing much to ensure taxpayers’ dollars are spent equitably or wisely to supplement those efforts. If we expect states to step up their game and ensure students with disabilities have better outcomes than they do now, we’ll need a financing mechanism that’s up to the task.

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